Categories: Tax Advice

Understanding the contra fiscum rule

This common law rule is applied where the interpretation of a particular tax statute is ambiguous.

In a previous article, I discussed the Annandale Farms judgement involving Shell and SARS.

Here, you will recall, Shell contended that the expropriation of land did not involve the supply of goods and services; therefore Section 7(1) (a) of the VAT Act did not apply.

The company went directly to the High Court for a declaratory order (sought when there is doubt as to the legal rights of parties).

The case rested on a perceived ambiguity in the VAT Act’s use of the word ‘supply’. Was it to be taken as a given in the transfer of property, in which case VAT was due? Or did a vendor have to actively supply services?

If the latter interpretation was valid, then Shell did not owe VAT for the reasons given. And indeed, the court found in Shell’s favour, noting that the Expropriation Act makes it clear that ownership of the property changes from the date of expropriation and no ‘action’ is involved on the part of a vendor whose land is expropriated.

In his ruling, the judge referred to the contra fiscum rule, and I want to take a closer look at this.

It’s a common law rule that is applied where a reasonable reading of the text of a statute reveals an ambiguity.

The judge pointed to substantial legal precedent showing that if there is ambiguity in a statute where a burden is placed upon the subject (such as paying VAT), the general rule is that the statute must be interpreted in favour of the subject.

The judge also cited Glen Anil Development Corporation Ltd v Commissioner for Inland Revenue 1975(4) SA 715 (A), where it was held that there is no reason this rule of interpretation should not be applied to fiscal statutes.

There are other rules of interpretation to which a difficult or complicated statute may be subjected. For example, one holds that the words in a statute cannot simply be ignored.

Only in rare instances may the court ‘read in’ words to give effect to the true intention of the legislator as deduced from a reading of the whole statute.

However, my point is that if a statute is ambiguous and other rules do not lead to a clearer understanding of the intention of the legislature, then contra fiscum will apply – in favour of the taxpayer.

It is part of our powerful common-law heritage. Our courts have given effect to
the rule since at least the creation of the Union of South Africa, right up to the present day.

Recent Posts

Land: access vs ownership

The one crucial point that should not be forgotten by all the organisations and political parties representing, or claiming to…

2 hours ago

Agri interventions key to Ramaphosa’s economic stimulus package

President Cyril Ramaphosa announced that government has reprioritised funding towards an economic stimulus package that would focus on agriculture, among…

22 hours ago

Biosecurity: your first line of defence against disease

Dr Fambies van Biljon, veterinarian at Sovereign Foods, talks to Glenneis Kriel about the crucial need to establish a well-run…

1 day ago

Local manufacturers seen at Royal Show

Every year, the Royal Show features exhibitors and agricultural equipment quite different from those at Nampo. The Royal Show is…

2 days ago

Free State fires claim first fatality

Fire officials in the Free State expressed hope that the forecast of rain for the weekend could bring some relief…

2 days ago

Making the most of calcium as a soil and plant nutrient

Despite being a vitally important element for optimal crop production, calcium is often largely undervalued by farmers and agronomists. Plant…

3 days ago

This website uses cookies.